By Kay Schaefer
So “it” happened. Something has occurred at your self-storage property … A vehicle ran into your gate, the wind pulled up part of the roof, vandals broke into the office and caused damage, or worse, a fire occurred in one or more of the units. It’s upsetting, but being prepared with strategies to handle the situation before it happens can help soften the blow. Let’s review what to do and expect when you have property damage. This way, you’ll be ready to deal with these situations if one should occur.
Take a deep breath. Now, take an initial look at your property and gauge the severity of the damage. Is it something that’ll just need a bit of cleanup and minor repairs, or is the damage more severe, requiring a professional to fix it?
If it’s minor, address it quickly and be happy it wasn’t worse. If it’s more damage than you can remedy on your own, it’s time to call your insurance agent and file a claim under your policy. Let’s review your obligation and that of your insurance carrier, then address the repairs and cleanup of your property.
Duties Under Your Insurance Policy
Both you and your insurance carrier have duties under your policy when there’s a loss. Your duties require you to report the loss to your agent or carrier as soon as possible. This is usually done by phone. You’ll need to describe what happened and when with as much detail as possible. If there’s another insurance policy that may provide coverage for your loss, you must share that information, too.
First, take photos and preserve evidence of the damage. This isn’t only a policy requirement, it will help your claim experience go much smoother. The policy also requires you to protect your property from further loss as much as possible. This might include placing a tarp over a damaged roof, hiring a service to clean up water from a plumbing leak, or securing your property after the gate was damaged.
In addition, your policy requires you to document the value of what you’ve lost or what’s been damaged. Your adjuster can help you evaluate the harm. Depending on the amount, you may need to get one or more contractors to give you a bid on the repairs needed to bring your property back to the condition it was in prior to the incident.
Your insurance company is required to promptly and thoroughly investigate your claim for loss. When the damage is minor, this is typically accomplished via phone, e-mail or mail. When the damage is great or there’s some question about the cause of the loss, you insurance company might send an adjuster to your site to investigate and assist you in presenting your claim to the insurer.
The insurance company must also stay in touch with you. This means responding to any questions you have about your claim as well as sharing information about the investigation and the claim handling. The company must also make reasonably prompt decisions on paying or denying your claim, and paying all benefits owed under your insurance policy without undue delay.
Once you’ve come to agreement on the scope and cost of repairs with your insurance carrier, it’s time to begin the work needed to bring your property back to good condition. You’ll want to hire a contractor to do the work. You’re ultimately responsible for supervising the repairs repairs. This includes hiring professionals to do cleanup as well as debris removal, reconstruction, repair or any other work required. You may be able to find the names of contractors who specialize in self-storage through industry associations. There are vendor members who’ve joined associations at a national and state level who understand the nature of self-storage operations, including common elements of construction and repair.
Your city, county or state could enforce building codes that affect the work required. You’ll be notified by them during the permitting process, or your contractor may already be knowledgeable about these codes. There’s a coverage offered under most insurance policies to address the added costs of dealing with building ordinances. Ask your insurance agent about it. If your property is older or a conversion, you could incur substantial code-related costs, so be sure this coverage is included in your policy and the limits are adequate.
Your policy also states how payment will be made. You want a policy that provides replacement cost with no coinsurance. This means you’ll be paid the full replacement or repair costs for the damaged property, subject to the limits in your policy. Coinsurance is a penalty imposed for under insuring your property.
You’re entitled to be paid the loss of actual cash value (ACV) under the policy prior to the completion of repairs. The ACV is determined by the replacement cost less depreciation. When you’ve finished repairing or replacing the damaged or destroyed property, you can then make a claim for the additional amount payable under the policy for the full cost of repairs or replacement.
If your income is reduced because you can’t rent units due to the damage, you may also have coverage under your insurance policy for loss of income, also know as business-income protection. To make a claim for recovery of lost income, you’ll need to provide enough information to verify the amount of your loss. This will include rent rolls, current occupancy rate, historical records of rent, and any documentation reflecting a seasonal fluctuation in your income. This same coverage can also pay for any extra expenses you generate that are necessary to prevent or reduce your loss of income due to property damage.
Loss-of-income coverage may end when the repairs are completed, but you may have a continuing loss of rental income until you can lease up your units. Your insurance policy may have an extended period of indemnity built into your coverage. This will extend the time period of your loss-of-income coverage for a set period past the completion of repairs. This is an important benefit because it gives you that added income protection while renting up units to the same level prior to your property damage.
Once your property has been repaired, you’ll be back to operation as usual. Don’t forget your insurance agent and carrier are there to assist you. Call them with any questions. Now that things are back to normal, congratulations! I hope “it” doesn’t happen again. If it does, you’ll know what to do.
Kay Schaefer is the senior underwriter for Deans & Homer, an insurance managing underwriter that has provided specialized coverage for the self-storage industry since 1974. She has more than 30 years of experience in writing unique insurance coverage. For more information, call 800.847.9999; visit www.deanshomer.com.